Abstract

http://ssrn.com/abstract=2374945
 


 



Rolling the Dice: When Does Tax Avoidance Result in Tax Uncertainty?


Scott Dyreng


Duke University

Michelle Hanlon


Massachusetts Institute of Technology (MIT) - Sloan School of Management

Edward L. Maydew


University of North Carolina at Chapel Hill

January 5, 2014


Abstract:     
We provide initial evidence on the relation between tax avoidance and tax uncertainty, where tax uncertainty is the possibility of losing a claimed tax benefit. We find that tax avoiders, i.e., firms with relatively low cash tax rates, bear significantly greater tax uncertainty than firms that have higher cash tax rates. We also test hypotheses about the determinants of the relation between tax avoidance and tax uncertainty. The data reveal that tax avoidance associated with research and development (R&D) is particularly uncertain. Moreover, the increased uncertainty from R&D-related tax avoidance is concentrated in firms with high tax haven intensity, suggesting that cross-border income shifting and transfer pricing are important determinants of the relation between tax avoidance and tax uncertainty.

Number of Pages in PDF File: 46

Keywords: tax avoidance, tax uncertainty

JEL Classification: M41, H25

working papers series


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Date posted: January 6, 2014  

Suggested Citation

Dyreng, Scott and Hanlon, Michelle and Maydew, Edward L., Rolling the Dice: When Does Tax Avoidance Result in Tax Uncertainty? (January 5, 2014). Available at SSRN: http://ssrn.com/abstract=2374945 or http://dx.doi.org/10.2139/ssrn.2374945

Contact Information

Scott Dyreng
Duke University ( email )
Box 90120, Fuqua School of Business
Durham, NC 27708-0120
United States
Michelle Hanlon
Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )
77 Massachusetts Ave.
E62-416
Cambridge, MA 02142
United States
617-253-9849 (Phone)
Edward L. Maydew (Contact Author)
University of North Carolina at Chapel Hill ( email )
McColl Building
Chapel Hill, NC 27599-3490
United States
919-843-9356 (Phone)
HOME PAGE: http://www.kenan-flagler.unc.edu/faculty/directory/accounting/edward-maydew

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